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A better way to get government loans for college started on July 1. Rather than banks, now the Department of Education handles federally guaranteed student loans. The change was part of the health care reform bill passed in March that had bank lobbyists kicking and screaming. The government ended billions of dollars in taxpayer subsidies by removing banks as the middleman for federally guaranteed loans.

Article source: Federal student loan move ends taxpayer gravy train for big banks by Personal Money Store

Government takeover of federal student loans saves taxpayers billions

The end of student loan subsidies for big banks will create $ 68 billion in savings over the next 10 years, as outlined by government estimates. Colleges and universities are required to offer all loans through the Federal Direct Loan Program (FDLP) from July 1 forward. The FDLP, the government says, will be a more reliable lender for students and a better value for taxpayers.

What changes with federal student loans?

The Department of Education’s Direct Loan program now handles all government loans for college. USA Today reports the Federal Family Education Loan Program (FFELP), which had allowed banks and other commercial lenders to offer federally guaranteed loans, has been eliminated by the FDLP. Affected loans include subsidized and unsubsidized Stafford Loans for undergraduate and graduate students, also as PLUS (Parent Loan for Undergraduate Students) for parents and PLUS loans for graduate and professional degree students.

Banks lose easy money, students gain scholarships

Most of the savings reaped by eliminating commercial banks from government loans for college can be applied toward the Federal Pell Grant program. Pell Grants, money that doesn’t have to be repaid, go to students from lower-income families. This fall Pell Grants increase $ 200 to a $ 5,500 maximum and remain at that level until 2014, the Native Times reports.

new program changes needs for students

A secure site for the federal government’s new program, studentloans.gov, provides all the electronic forms students need to file for federally guaranteed student loans. Kenosha News reports that the change is putting pressure on colleges and universities in both responsibility and the volume of students that must be processed. Students and their parents are being advised by financial aid directors to contact their schools financial aid office with questions as soon as possible.

More data accessible at these websites:

usatoday.com

nativetimes.com

kenoshanews.com